March 14, 2007 -- When James Scurlock first arrived as an undergraduate student at the University of Pennsylvania's Wharton School of Business, he was filled with optimism. "I was inspired by Donald Trump, which I think a lot kids were back when I went to college," he said.
Scurlock did well, starting up and then selling a profitable investment newsletter. Along the way he became a consumer rights advocate.
The proceeds have paid for the making of "Maxed Out," the documentary Scurlock wrote and directed that takes a harsh look at the credit card industry.
Here are just some of the issues Scurlock examines in the film:
Credit card fees have gone up 160 percent over the last five years.
The average American household has more than $9,000 in credit card debt and pays more than $1,300 a year in interest rates.
The credit card companies mail out about 4 billion offers a year.
Spend More Money?
Scurlock places blame not only on the industry but also on the government. "After 9/11, all of our politicians came out and said spend more money," he said. "You know, keep this economy going. And I thought, that's so odd. Because normally in a time of war you would sacrifice and save, and here we are being told by our leaders to spend, spend, spend."
"Congress gets a lot of money from the credit card industry, in contributions," Scurlock continued. "More than that, though, I think politicians are really terrified of what would happen if they came down too hard, and all this easy credit was suddenly snatched away and the economy dried up."
The film contends that the credit card industry has made credit too easily available in an effort to cash in on big fees.
'They Want You to Be Late'
"Back in the '80s [we] were paying $15 for over limit and late fees," said Bud Hibbs, a consumer advocate featured in the film. "I just saw that raised to $43. Think about that: $43 if you are late, $43 if you are over limit. That's $86 dollars on your credit card before you even do anything. Then your interest rate is going to jump to 21.9 [percent] and then all the way up to 28.9 [percent]. They want you to be late."
Another expert with a passionate opinion is Elizabeth Warren, a professor at Harvard Law School who teaches contract law, bankruptcy and commercial law.
"The ideal customer is the one who is in serious financial trouble: stumbling, making a payment, missing a payment but making another payment, staying just barely on their feet, making three payments in a row, catching up a little, falling behind a little and staying in this sweatbox for years and years and years," she said.
One of the most interesting sequences in the film is a glimpse into how debt is purchased. The film says debt purchasing is one of the fastest growing industries on Wall Street, and that last year investors purchased $75 billion of bad debt alone.
The Dark Side of Debt
"They've just stumbled upon the Wild West of the financial industry -- debt buying," said Scurlock of the folks in this industry. "I mean, you and I could probably go out [and] buy a million dollars of debt for pennies on the dollar."
"I sort of saw myself in them, to be honest, when I went to Wharton," he said. "They're in this great industry where you can make money hand over fist. And they're so excited, and they're so ready to make their fortune and make their way in the world."
To emphasize the fact that having mounds of debt can ruin lives, Scurlock has injected personal stories into the film. The movie chronicles the tale of two college students who committed suicide after their struggles with debt.
In the film, Janne O'Donnell explains what happened to her son Sean. "You know, he was a smart kid, but he didn't know how to get in and how to get out, and he told me that he felt like he was a failure. And a week later -- a week later -- he hung himself."
The Debt Data
It's hardly surprising that the American Bankers Association disagrees with the film's premise.
"I think what this movie does is look at certain isolated examples," said Ed Yingling, CEO of the ABA. "We don't think they're indicative of what really goes on in the credit card market."
The ABA is also quick to point out that only 4 percent of consumers are delinquent on payments, and that many cards have done away with fees. Finally, the ABA points out that interest rates are down from 18 percent to, on average, 12 percent.
But Warren isn't convinced. "The credit card companies can say whatever they want to pay their PR people to say," she said, "but the reality is that it's not backed up by the data."
She would like to see the buck stop here. "I don't care whether we're talking about irresponsible people, sick people, people who've lost their jobs," she said. "There's a point at which you've paid the debt, you've paid some interest, you even gave them a little something for penalties -- it ought to be enough."